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The Prior Year AMT Credit allows taxpayers to reduce their tax bill after a year in which they were subject to AMT. Here's how to enter that credit in Holistiplan.
When a taxpayer is subject to AMT (Alternative Minimum Tax) in a given year, they accrue a Prior Year AMT Credit for use in future tax years. To the extent the tax calculation under the regular tax calculation exceeds the tentative minimum tax under the AMT calculation, any available Prior Year AMT Credit can be utilized, effectively reducing their tax bill. Therefore, if your client is projected to pay any AMT in their current tax year, no Prior Year AMT Credit can be utilized in that same tax year.
To incorporate any Prior Year AMT Credit, you will manually enter that total available amount as a nonrefundable credit in the "Other Nonrefundable Credits" field where outlined below.
You can click on our (?) icon circled above for an explanation of how Holistiplan will limit the amount of Prior Year AMT Credit is applied to the extent that the regular tax exceeds the tentative minimum tax as described earlier. The amount shown in the "Credit Applied" text above will change so as to limit the amount of credit applied to the scenario as noted below.
Other limitations may apply, as the final calculation of the Prior Year AMT credit is made on Form 8801. That form is not currently supported within Holistiplan. Please consult with a tax professional to confirm if any such additional limitations apply in your client's case.
How do you know to what, if any, extent your client's tax under the regular calculation exceeds the tentative minimum tax under the AMT calculation? Click on the calculator icon circled below within the "Alternative Minimum Tax" section of Scenario Analysis for more details.
This calculator icon will show the math under the hood for Holistiplan's calculation of AMT for your client's scenario, which mimics the flow of the calculation on Form 6251. Subtract the amount listed for Line 9 outlined in red above (tentative minimum tax under the AMT system) from Line 10 outlined in green above(standard tax liability). This is the maximum amount of AMT credit you can use in the current scenario.
In the example above, the taxpayer could utilize a maximum credit of $17,174.68 [$26,506.26 minus $9,331.58] in the tax year being modeled from any available Prior Year AMT Credit that had been generated in previous tax years.
NOTE: As with other carryforwards, Holistiplan does not automatically apply any Prior Year AMT Credit carryforwards to future scenarios. You will want to manually enter any available Prior Year AMT Credit amounts for future tax years in the same field within the "Nonrefundable Tax Credits" section described above for any scenarios modeling future tax years.
Our article on Alternative Minimum Tax may be helpful as well, and if you have any questions, please Contact our Support Team for more assistance!